Practical  Municipal  Accounting 


A  Brief  Description  and  Summary 


of  the 


Modern  Uniform  System  of  Accounts 


Installed  in  the  Offices  of  the 


CITY  OF  OAKLAND,  CALIFORNIA 


Under  the  Direction  of  I.  H.  Clay,  City  Auditor 


Illustrated  by  Graphic  Charts 


■  \^-\v^r'-^':-:v~^ 


KLINK,   BEAN   AND    COMPANY 

Public   Accountants 

San  Franciico— Los   Angeles 

1916 


,<v 


^^s^ 


9 


INDEX 


Page 

FOREWORD 4 

PRACTICAL  MUNICIPAL  ACCOUNTING..- 5 

APPENDIX: 

City  of  Oakland  Balance  Sheet,  as  of  Sept.  30,  1915- 14 

Consolidated  Statement  of  Revenues  and  Expenses 15 

Chart  of  Accounting  Organization 1 7 

Chart  of  Budget  Schedule 19 

Chart  of  Consolidated  Balance  Sheet 21 

Chart  of  Revenues 23 

Chart  of  Expenses  of  Department  of  Public  Health  and  Safety  (a 
typical  department  shown  as  an  illustration) 25 


344031 


FOREWORD. 

A  new  system  of  municipal  bookkeeping,  embodying  the 
latest  advances  of  accounting  science,  has  recently  been  intro- 
duced in  the  departments  and  offices  of  the  City  of  Oakland. 

For  six  months,  or  since  July  ist,  the  new  system  has  been 
in  full  operation,  currently  recording  and  automatically  report- 
ing the  essential  facts  connected  with  every  municipal  trans- 
action, large  and  small.  For  the  first  time,  every  dollar  of 
revenue  and  expense  is  subject  to  responsible  control,  adminis- 
trative officers  are  in  possession  of  properly  assembled  records 
and  statistics  for  the  better  management  of  their  departments, 
and  intelligible  reports  are  available  for  the  public,  showing 
every  detail  of  what  the  City  does,  how  much  it  does  and  at 
what  cost. 

In  the  opinion  of  the  officials,  the  installation  of  the  new 
accounting  system  has  been  one  of  the  most  important  civic 
undertakings  in  the  history  of  Oakland.  It  is  recognized  that 
right  accounting  is  the  fundamental  requisite  to  efficient  gov- 
ernment; that  it  underlies  every  permanent  reform.  Under  the 
new  system,  Oakland  can  become  one  of  the  best  governed 
cities  in  America. 

What  such  accounts  mean  to  a  city,  to  the  officers  charged 
with  the  management  of  its  affairs  and  to  the  public  that  pays 
the  bills  can  best  be  explained  by  a  brief  discussion  of  the 
nature  and  functions  of  accounting  and  by  comparing  the 
present  system  with  the  methods  and  practices  in  use  in  the 
City  ijt 'Oakland  :(tL-ityp4cal  city)  before  July  i,  1915. 

;.  : ;  •: ."     •.•;:  :    :  •       KLINK,  BEAN  AND  COMPANY. 
January  i,  1916. 


:^z 


PRACTICAL  MUNICIPAL  ACCOUNTING 


Accounting  is  the  process  which  reduces  to  figures  the  record  of  a  city's 
activities.  In  practice,  it  provides  an  exact  basis  for  administrative  and 
public  judgment  concerning  the  wisdom,  propriety  and  legality  of  official 
acts.  Without  it  no  intelligent  judgment  can  be  formed  of  a  city's  business 
or  of  the  efficiency  or  inefficiency  of  its  officers.  In  the  absence  of  the 
necessary  facts  which  are  the  product  of  right  accounting,  able  officials  are 
handicapped  and  incompetency  is  not  detected. 

In  every  private  business  or  corporation,  certain  accounts  are  deemed 
indispensable  and  the  science  of  modern  accounting  has  developed  a  set  of 
principles  which  are  applied  in  keeping  the  books  of  every  well-managed 
private  enterprise.  Broadly  speaking,  the  practical  purposes  of  modern 
accounting  are  as  follows : 

(a)  To  control  and  safeguard  the  company's  funds; 

(b)  To  record  and  collect  the  facts  necessary  for  administrative 

guidance ; 

(c)  To  fix  the  responsibility  for  every  official  act;  and 

(d)  To   measure  the  efficiency  of  the  officers  in  charge  of  each 

department,  bureau  and  office. 

In  developing  the  Klink-Bean  System,  the  view  was  taken  that  a  city  is 
a  great  business  corporation,  owning  vast  property  interests,  borrowing 
large  sums  on  its  credit  and  engaging  in  business  on  a  grand  scale  for  the 
benefit  of  the  community  at  large.  A  city  differs  from  a  private  corpora- 
tion in  details  having  little  effect  upon  the  accounting  principles  applicable 
to  both.  Officers  of  the  one  are  as  much  in  need  of  information  about  the 
business  as  are  officers  of  the  other;  the  same  kind  of  responsibility  for 
money,  properties  and  stores  must  be  enforced ;  the  same  kind  of  reports 
must  be  made  to  the  stockholders  (i.  e.,  the  Public).  It  follows  that  sound 
accounting  principles  are  applicable  to  both. 

Conditions  Before  Installation: 

It  cannot  be  said  that  the  municipal  accounts) in  Oakland  were  any 
worse  than  in  the  average  American  city.  Nor  were  they  any  better. 
About  the  only  accounts  kept  were  those  required  for  cash  expended  and 
to  be  expended;  that  is,  they  met  the  legal  and  technical  requirements  of 
appropriations  and  nothing  more. 


The  old  system  was  a  development  of  many  years  of  confused,  hap- 
hazard and  unscientific  procedure.  When  the  City's  business  was  compara- 
tively small  and  its  activities  few,  there  was  relatively  little  need  for  an 
extended  system  of  accounting  and  business  administration.  It  was  consid- 
ered sufficient  to  keep  simply  a  record  of  the  flow  of  cash  through  the 
treasury — receipts  and  disbursements  only.  No  consideration  was  given  to 
the  value  and  importance  of  installing  a  modern  system  looking  to  the 
definite  determination  of  policies,  methods  of  control  and  fixing  of  responsi- 
bility; to  information  showing  the  results  of  past  policies;  to  the  production 
of  statistical  data  whereby  the  benefits  of  what  the  City  does  might  be 
measured;  or  to  any  of  the  other  advantages  of  business  accounting. 

Until  last  July,  the  municipal  accounts  never  revealed  the  cost  of  any 
activity  for  any  given  period,  nor  did  they  show  the  financial  condition  of 
the  City  at  the  end  of  any  fiscal  year,  except  the  single  item  of  cash  in  the 
treasury.  No  records  or  exhibits  were  made  of  expenses  incurred  but  not 
paid,  or  of  revenues  accrued  but  not  received.  No  inventories  of  fixed  and 
floating  assets  were  kept,  nor  was  there  any  way  to  disclose  variations  or 
changes  in  ownership,  or  amounts  of  property,  stores  and  equipment 
belonging  to  the  City.  No  distinction  was  made  between  the  expense  of 
administration  and  operation,  and  the  sums  laid  out  for  betterments  and 
additions  to  fixed  property. 

In  other  words,  the  accounts  of  the  City  were  on  a  strictly  cash  basis. 
Officers  were  charged  with  responsibility  for  cash  only  and  the  only  reports 
were  of  cash  transactions.  The  greater  importance  of  the  vast  municipal 
estate,  of  which  the  cash  formed  only  a  fraction,  was  overlooked  entirely. 

Under  these  conditions,  an  intelligent  statement  of  the  affairs  of  the 
City  could  not  be  made.  The  City's  reports,  published  annually  at  consid- 
erable expense,  were  useless  in  so  far  as  they  undertook  to  inform  the  public 
of  what  the  City  owned,  what  it  owed,  how  many  measurable  units  of  any 
service  it  was  able  to  supply  for  a  given  sum,  or  any  other  facts  by  means 
of  which  the  taxpayer  might  discover  how  his  money  was  being  spent. 
The  value  of  statistics  depends  entirely  on  the  form  in  which  they  are  pre- 
sented, and  a  financial  report  that  requires  the  services  of  an  expert 
accountant  to  interpret  is  of  little  or  no  value. 

It  was  but  natural,  in  view  of  the  conditions  of  the  City's  accounts  and 
reports,  that  the  plan  of  spending  each  year's  income  should  be  crude.  A 
budget  showing  how  many  units  of  a  given  service  were  to  be  supplied, 
how  much  the  City  was  to  lay  out  for  new  properties,  how  much  of  the 
annual  expense  would  go  for  administration,  operation  and  maintenance, 
was  unknown.  Department  heads  were  accustomed  to  send  in  their  esti- 
mates in  a  lump  sum,  which  they  regularly  "padded"  in  expectation  of  a 
horizontal  cut  which  was  usually  forthcoming.  As  a  work-program  based 
on  actual  needs,  the  annual  budget  meant  nothing.  Under  such  conditions 
waste  was  inevitable  and  efficiency  impossible. 


Finally,  the  keeping  of  the  accounts  was  wholly  unorganized,  with  the 
Auditor  having  only  little  or  no  control  over  the  books  of  the  several 
departments,  which  were  kept  by  clerks  responsible  to  the  department  heads 
and  independent  of  the  Auditor.  This  resulted  in  needless  duplication  of 
work  and  untold  confusion. 

Development  of  the  New  System: 

The  first  step  in  the  development  of  a  new  system  was  to  make  a 
detailed  study  of  the  organization  of  the  City  Government  and  prepare  a 
set  of  Organization  Charts  showing  the  distribution  of  powers  and  duties. 
Where  the  Charter  permitted,  changes  were  made  looking  to  a  greater  sim- 
plification and  co-ordination,  with  the  result  that  many  defects  were  cor- 
rected at  once. 

Having  reduced  the  organization  to  a  simpler  form,  the  next  step  was 
to  analyze  the  City's  expenditures  over  a  term  of  years  and  prepare  a 
uniform  Classification  of  Expenditures  applicable  to  all  departments.  On 
the  basis  of  this  work,  the  City  was  able  to  revise  its  purchasing  methods 
in  such  a  way  as  to  effect  large  savings. 

A  further  step  was  the  preparation  of  a  detailed  inventory  of  all  city 
property,  real  and  personal,  as  a  basis  for  property  accounting,  which  never 
before  existed  in  the  City  of  Oakland.  No  one  doubts  the  advantage  of  a 
strict  accounting  for  cash,  but  most  cities  overlook  the  fact  that  it  is 
equally  important  to  enforce  a  strict  stewardship  over  the  supplies, 
materials,  tools  and  fixed  properties  that  are  no  less  valuable  than  the  cash 
which  they  represent.  City  property  is  sometimes  bought  and  permitted  to 
lie  idle.  Often  it  is  forgotten.  An  inventory  summarized  in  a  balance  sheet 
is  a  constant  reminder  that  property  is  owned  that  should  be  taken  care  of 
and  used  or  sold. 

With  all  of  the  necessary  information  at  hand,  a  uniform  accounting 
system  based  on  scientific  principles  was  devised.  It  was  the  aim  to  make 
it  practical  to  the  last  degree,  readily  understandable  by  both  officers  and 
public,  and  to  serve  the  practical  ends  of  efficiency  in  government. 
Accounts  which  automatically  detect  waste,  error,  fraud,  incompetence  and 
extravagance  will  insure  efficient  government  through  the  sheer  force  of 
publicity.  The  experience  of  those  cities  that  have  reformed  their  account- 
ing procedure  in  the  last  dozen  years  was  carefully  studied  and  the  results, 
taken  with  the  accounting  principles  known  to  private  business,  were 
applied  to  the  problem  presented  by  the  existing  conditions.  The  entire 
procedure  of  planning,  spending,  accounting,  auditing  and  reporting  has 
been  made  over,  and  the  new  System  is  now  in  full  operation  throughout 
the  city. 


y        

j(     C  N  J  V  K  l{  .S  I  T  V 


The  Klink-Bean  System  of  Accounts: 

The  following  discussion  of  the  new  System  will  go  not  so  much  to  the 
technical  nature  of  the  accounting  principles  involved,  but  rather  to  the 
meaning  of  the  accounts  from  the  standpoint  of  the  city  officials  and  the 
public : 

The  essential  characteristics  of  the  revised  accounting  system  are: 

1.  The  complete  co-ordination  of  all  accounting  and  auditing  under 

one  department. 

2.  Accounting  with  revenue  and  expense,  instead  of  cash  receipts 

and  disbursements. 

3.  Balance  sheets  showing  the  City's  assets  and  liabilities. 

4.  A  standard  classification  of  expenditures. 

5.  A  complete  record  of  unit  and  job  costs  in  all  operating  depart- 

ments. 

6.  A  segregated  budget  expressed  in  terms  of  service  and  cost. 

7.  A  system  of  uniform  monthly  reports  giving  complete,  accurate 

and  understandable  information  to  officers  and  public. 

8.  Provision  for  the  assimilation  into  the  system  of  the  accounts  of 

new  functions  or  enterprises  which  the  City  may  undertake 
hereafter. 

1.     Co-ordination  of  Accounting. 

Although  the  Auditor  is  designated  by  the  Charter  as  the  accounting 
officer  of  the  City,  each  department  heretofore  kept  its  records  and  accounts 
independently  of  the  Auditor  and  of  other  departments.  Naturally  there 
was  no  uniformity  in  the  system  and  anything  approaching  a  consolidated 
statement  was  impossible.  Inasmuch  as  the  departmental  bookkeepers  were 
responsible  to  their  department  heads,  the  Auditor  was  powerless  to  enforce 
rules  looking  to  improved  procedure. 

In  the  present  system,  the  Auditor  is  given  complete  control  over  the 
functions  of  accounting  and  auditing  throughout  the  City.  A  uniform 
procedure  is  prescribed  for  all  departments  and  the  books  and  records  are 
kept  by  Division  Accountants  who  are  directly  responsible  to  the  Auditor 
in  a  relationship  which  amounts  virtually  to  that  of  deputies  and  principal. 
At  present  there  are  nine  Division  Accountants,  but  eventually  this  number 
will  be  reduced  to  five,  or  one  each  in  the  Mayor's  office  and  the  depart- 
ments of  Public  Health  and  Safety,  Public  Works,  Revenue  and  Finance, 
and  Streets.  Already  all  confusion  and  duplication  of  effort  have  been 
eliminated  and  the  new  accounts  are  being  maintained  at  less  expense  than 
were  the  old. 

8 


2.     Accounting  with  Revenue  and  Expense. 

A  city's  financial  statement,  to  be  a  truthful  reflection  of  what  has 
taken  place  in  its  finances,  must  be  based  upon  accretions  to  and  depletions 
of  wealth,  that  is,  upon  revenue  and  expense  as  distinguished  from  cash 
receipts  and  disbursements.  Recognition  of  this  fundamental  distinction  is 
of  primary  importance. 

In  the  present  system,  the  operating  accounts  of  the  City  conform  to 
the  following  definitions: 

REVENUE  is  the  income  accruing  to  a  government  from  taxes, 
licenses,  and  miscellaneous  other  sources  in  a  stated  period,  irrespective  of 
the  period  in  which  the  cash  is  collected. 

EXPENSE  is  the  cost  of  operation,  maintenance  and  other  charges 
payable  out  of  current  revenues  incurred  in  a  stated  period,  irrespective  of 
the  date  of  payment. 

In  accounting  with  revenue,  every  dollar  of  the  City's  income  from 
licenses,  permits,  etc.,  is  controlled  through  the  use  of  financial  stationery 
which  is  issued  by  the  Auditor  to  the  collecting  officers,  who  are  charged 
for  the  blank  forms  in  a  special  stationery  account.  Instead  of  twenty  or 
more  printed  forms  for  licenses,  as  heretofore,  the  new  system  provides  for 
a  uniform  blank  bearing  a  graduated  coupon  on  the  left  which  is  cut  in 
such  a  way  as  to  indicate  the  amount  paid  by  the  licensee.  The  counterfoil 
from  which  the  issued  license  is  cut  is  a  positive  check  upon  both  error  and 
undetected  defalcation.  At  the  end  of  each  day,  the  counterfoils  are  trans- 
mitted to  the  Auditor  by  the  collecting  officers,  who  are  credited  on  their 
stationery  account  and  charged  for  the  total  moneys  which  the  records 
show  they  should  have  received. 

In  accounting  with  expense,  the  Auditor  registers  every  purchase  order 
and  every  contract  at  the  time  such  order  or  contract  originates  and  sets 
up  on  his  appropriation  ledger  a  reserve  to  indicate  the  liability  against  the 
City.  Heretofore  there  was  no  formal  record  c^f  the  City's  outstanding 
liabilities  and  spending  officers  trusted  to  good  fortune  and  their  own 
memories  to  avoid  overdrafts  upon  their  appropriations.  This  was  the 
effect  of  keeping  books  on  a  strictly  cash  basis.  Its  defect  lay  in  the  fact 
that  it  left  the  City  without  protection. 

By  making  a  record  of  every  liability  at  the  time  it  is  incurred  and 
reserving  funds  to  pay  it  upon  maturity,  the  Auditor  is  able  to  show  the 
exact  condition  of  every  appropriation  account — not  only  the  unexpended 
balance,  but,  what  is  more  important,  the  unencumbered  balance  remaining. 
The  Division  Accountants  keep  such  records  in  detail  in  their  own  depart- 
ments, sending  monthly  reports  to  the  Auditor,  who  compiles  therefrom  a 
general  summary.  Before  any  order  or  contract  for  work  or  supplies  can 
be  executed,  it  must  bear  the  certification  of  the  Division  Accountant  that 


an  unencumbered  balance  remains  in  the  appropriation  sufficient  to  cover 
the  charges. 

The  appropriation  ledger  is  supported  by  fund  ledgers,  which  show  for 
each  fund  (a)  the  unapplied  surplus  in  net  cash,  (b)  the  available  surplus 
other  than  cash,  i.  e.,  accrued  but  uncollected  revenues,  and  (c)  the  require- 
ments, or  appropriations  authorized  to  be  spent. 

The  information  which  these  accounts  provide  is  invaluable  in  securing 
responsible  control  of  the  City's  finances  and  in  affording  a  basis  for  the 
scientific  management  of  municipal  affairs.  A  further  object  of  accounting 
with  expense  instead  of  cash  expenditures  is  to  facilitate  a  comparison  of 
costs,  which  can  be  made  only  when  the  costs  are  reduced  to  a  unit  basis. 
Obviously,  to  ascertain  unit  costs,  all  of  the  expenses  applicable  to  the 
period  and  not  merely  those  paid  in  cash  should  be  divided  by  the  total 
number  of  units  of  results.  Under  a  system  of  recording  expenses  only  as 
cash  is  paid  out,  there  cannot  be  a  proper  allocation  of  charges  according 
to  the  periods  affected  or  cost  of  results  achieved,  and  therefore  no  basis 
for  computing  unit  costs.  Under  the  present  system,  unit  costs  can  be  com- 
puted promptly  and  accurately  in  every  department.  (See  statement  of 
Revenue  and  Expenses,  page  15.) 

3.     Balance  Sheet. 

In  every  private  business  it  is  considered  essential  to  summarize  the 
results  of  current  transactions  periodically  in  a  balance  sheet,  or  statement 
of  assets  and  liabilities.  When  the  nature  of  the  business  requires  a  large 
capital  investment  in  fixed  properties  and  equipment,  the  balance  sheet 
becomes  doubly  important  as  a  means  of  enforcing  responsible  custodian- 
ship on  the  part  of  the  officers  in  charge. 

The  same  considerations  operate  to  require  the  balance  sheet  as  an 
indispensable  part  of  municipal  accounting  and  in  the  present  system  it  is 
the  keystone.  Here  the  results  of  all  transactions  are  focussed  month  by 
month  in  a  statement  which  is  a  theoretical  but  accurate  cross-section  view 
of  the  financial  condition  of  the  City — what  it  owns  in  money,  property  and 
unliquidated  credits;  what  it  owes;  its  surplus  or  deficit.  At  the  close  of 
the  fiscal  year,  the  balance  sheet  tells  how  the  plan  of  that  year  has  worked 
out  in  dollars  and  cents.  It  is  the  only  accurate  measure  of  the  success  or 
failure  of  municipal  policies. 

The  balance  sheet  is  compiled  monthly  from  the  several  operating, 
capital  and  trust  fund  accounts.  Each  item  is  supported  by  supplementary 
schedules  in  full  detail,  which  are  changed  day  by  day  as  current  trans- 
actions are  recorded.  Every  figure  is  capable  of  immediate  verification  in 
the  supplementary  accounts,  which  also  contain  a  complete  historical 
record  of  every  transaction,  the  results  of  which  are  reflected  in  the  balance 
sheet.     (See  Consolidated  Balance  Sheet,  page  14.) 

10 


4.  Classification  of  Expenses. 

Good  statistics  are  experience  expressed  in  figures.  By  means  of  right 
accounting,  the  record  of  the  past  is  made  a  guide  for  the  future,  through 
the  collection  and  summarization  of  the  facts  which  it  is  necessary  for  the 
administrative  and  executive  officers  to  know. 

The  accounting  system  introduces  four  general  classifications  of 
expenses : 

1.  By  organization  units,  such  as  General  Government,  Protection 

of  Persons  and  Property,  Conservation  of  Health,  etc.,  fol- 
lowing the  uniform  classification  adopted  by  the  Census 
Bureau. 

2.  By  functional  activity,  such  as  police  service,  the  several  kinds 

of  sanitary  inspection,  maintenance  of  fire  houses,  etc.,  in 
such  a  way  as  to  afford  a  basis  for  computing  unit  costs. 

3.  By  character  of  expenditure,  such  as  administration,  operation, 

maintenance  and  capital  outlay. 

4.  By  objects  purchased,  such  as  personal  service,  fuel,  stationery, 

gasoline,  etc.,  in  such  a  way  as  to  afford  a  basis  for  stand- 
ardization of  services  and  supplies  in  all  departments. 

Monthly  reports  based  on  these  classifications  are  prepared  by  the 
Division  Accountants  and  copies  are  supplied  to  the  several  administrative 
and  executive  officers  and  to  the  Auditor,  who  compiles  a  summary  report 
covering  all  departments.  Such  reports  make  possible  the  application  of 
fact  standards  instead  of  opinion  standards  to  public  business;  they  become 
the  guarantee  of  efficiency. 

5.  Unit  and  Job  Costs. 

By  methods  which  are  common  to  every  well  managed  private  enter- 
prise, the  new  system  of  municipal  accounts  provides  for  the  compilation 
of  unit  costs  in  connection  with  every  operation  or  function  that  lends 
itself  to  this  branch  of  accounting.  The  work  of  each  operating  department 
is  divided  into  its  elements  and  the  units  of  service  in  given  periods  are 
added  together  and  offset  by  the  total  cost,  whether  in  labor  or  supplies, 
whether  paid  for  in  cash  or  interdepartmental  transfers. 

The  result  is  that  from  month  to  month,  from  year  to  year,  comparable 
statistics  will  be  produced  to  show  what  the  City  is  getting  for  its  money 
and  to  measure  the  efficiency  of  the  several  officers  and  employes.  Such 
records  are  an  incentive  to  the  introduction  of  improved  methods.  They 
will  not  only  detect  the  incompetent,  but  they  will  protect  the  competent 

II 


public  servant.  They  also  make  possible  the  comparison  of  results  obtained 
in  Oakland  with  those  obtained  in  other  cities  where  cost  accounting  is 
practiced. 

Of  almost  equal  importance  is  the  keeping  of  job  costs.  The  system 
provides  that  every  piece  of  work  undertaken  by  or  for  the  City  must  be 
ordered  on  a  blank  signed  by  a  responsible  officer  and  that  everything  used 
in  performing  that  particular  job  shall  be  charged  to  it.  Eventually  there 
will  be  established  a  set  of  standards  as  a  guide  for,  and  a  check  upon, 
those  who  have  such  work  in  charge. 

6.  %.  Segregated  Budget. 

Scientific  budget-making  is  one  of  the  most  important  functions  of  the 
City,  inasmuch  as  it  is  the  basis  of  the  tax  levy.  Heretofore,  owing  to  the 
general  absence  of  reports  and  statistics  showing  the  results  of  past  policies, 
it  was  impossible  to  estimate  the  financial  needs  of  the  people  with  any 
degree  of  accuracy.  Consequently  the  "budget"  consisted  of  a  long  list  of 
detached,  unrelated  requests  from  the  several  departments  which  the  City 
Commission  had  to  accept  or  reject  largely  by  guess-work. 

A  budget  should  be  a  financial  program  for  meeting  the  necessary 
requirements  of  the  public  service,  with  those  requirements  set  down  in 
such  a  way  that  the  public  may  know  what  kinds  of  work  are  planned  and 
how  much  of  each.  It  must  specify  or  appropriate  exact  amounts  based  on 
a  knowledge  of  exact  needs,  and  to  this  end  it  is  necessary  to  relate  the 
proposed  expenditures,  whether  for  salaries,  wages,  supplies  or  materials, 
to  the  amount  of  work  thajt  is  to  be  done.  This  is  called  the  principle  of 
functional  segregation. 

The  records  and  statistics  made  available  by  the  system  supply  all  of 
the  necessary  information  on  which  to  build  a  scientific  budget.  Instead  of 
asking  for  "lump  sum"  appropriations  without  evidence  to  support  them, 
heads  of  departments  submit  their  estimates  on  uniform  blanks  showing  in 
detail  the  kind  and  quantity  of  service  which  is  to  be  rendered  and  the 
exact  cost  thereof,  based  on  the  experience  of  the  preceding  year.  The 
unsupported  judgment  of  officials  gives  way  to  the  record  of  facts. 

7.  Uniform  System  of  Reports. 

A  well  designed  system  of  reports  is  to  the  operating  organization  of  a 
city  what  a  contour  map  is  to  a  military  leader,  or  a  sailing  chart  to  the 
captain  of  an  ocean  liner.  To  be  of  most  value,  reports  must  come  promptly 
and  currently  to  the  executive  and  administrative  officers  and  must  set 
forth  every  essential  detail  of  the  business  for  which  they  are  responsible. 

The  system  classifies  all  transactions  by  subjects  and  summarizes  them 
by  periods  in  a  system  of  reports  which  automatically  reveals  any  unusual 

12 


or  abnormal  conditions  that  may  exist.  These  reports  are  returned  to  the 
responsible  officers  daily,  weekly,  monthly  and  yearly,  according  to  the 
nature  of  the  subjects  to  be  considered. 

From  the  standpoint  of  the  public,  the  reports  are  one  of  the  most 
important  features  of  the  system.  They  show  the  public  how  its  money  is 
being  spent  and  what  results  are  obtained,  and  they  may  be  expected  to 
stimulate  in  Oakland,  as  in  other  cities  where  modern  accounting  has  been 
introduced,  a  greater  public  interest  in  civic  affairs. 

8.     Possible  Expansion  of  the  System. 

Every  growing  city  is  constantly  adding  new  functions  and  under- 
taking new  enterprises.  Accordingly,  an  accounting  system  must  permit  of 
expansion  to  include  the  accounts  which  it  may  be  necessary  to  maintain 
later,  without  sacrifice  of  uniformity.  The  system  takes  the  future  into 
account  and  it  is  possible  to  add  to  it  without  delay  or  inconvenience. 

Accounting  as  an  Aid  to  Efficiency: 

Scientific  accounting  of  itself  will  not  make  administration  efficient,  but 
by  making  available  all  of  the  necessary  information  it  establishes  the  first 
requisite  of  efficiency.  Ordinarily  public  opinion  can  be  counted  on  to  see 
that  the  information  so  provided  is  effectively  used,  in  those  cases  where 
officials  do  not  themselves  recognize  and  accept  the  opportunities  presented. 

By  the  installation  of  the  Klink-Bean  System,  Oakland  has  become  one 
of  the  pioneers  among  American  cities  in  the  matter  of  correct  account- 
ing. Before  many  years,  it  may  be  expected  that  other  cities  will  have 
followed  Oakland's  example  in  providing  a  modern  system  of  municipal 
accounts,  not  only  as  a  guide  for  administrative  officers  but  as  an  aid  to  the 
public  in  the  enforcement  of  its  beneficial  rights. 


^3 


TABLE  I. 


CONSOLIDATED    BALANCE  SHEET,  SEPTEMBER  30,   1915. 


General  Capital 

ASSETS  Total              Account             Account 

Cash: 

Cash  in  Hands  of  Treasurer  and  in  Banks $529,940.09       $220,077.26         $242,592.99 

Accounts  Receivable — Amounts  Due  the  City: 

Tax  Sales    67,567.10           67,^67.10 

Uncollected    Taxes    35.727-57           35,727-57 

Departmental  Accruals  82,369.13           82,369.13 

Deferred  Accounts: 

Stores     35,149-65           35,149-65 

Work  in  Process   49,120.34           49,120.34 

Prepaid  Expenses  and  Advances 12,265.51            12,265.51 

Miscellaneous  Tax  Accounts 26,876.96           26,876.96 

Lands   (Uncompleted  Purchases  from  Appropriations)...  177,820.00         177,820.00 
Buildings,  Structures  and  Improvements  (from  Appropria- 
tions)       22,680.73           22,680.73 

Equipment   (from  Appropriations) 14,441.74           14,441.74 

Interdepartment  Service  Charges  105.20                105.20 

Permanent  Properties  and  Equipment: 

Lands    10,514,399-57                                10,514,399.57 

Buildings,  Structures  and  Improvements   5,732,478.33                                 5,732,478.33 

Equipment    923,930.35                                    923,930.35 

Construction  in  Process    2,935,253.39                               2,935,253.39 

Total   Assets    $21,160,125.66       $744,201.19    $20,348,654.63 

LIABILTIES 

Immediate  Demands  for  Cash: 

Demands   Payable    $81,552.87       $76,295.74           $5,257-13 

Pay  Rolls  Payable  • 127,873.62         126,939.00                 934-62 

Warrants   Payable    132,695.96         1 14,937.12             14,664.58 

Depositors  and  Trusts 64,175.58 

Other  Liabilities: 

Advanced  Unsecured  Personal  Property  Taxes,  1915-1916  83,300.19           83,300.19 

Advanced  Unapplied  Receipts,   1915-1916 5,174-59             5,i74-59 

Advanced  Unapplied  Receipts,   1916-1917 595-89                595-89 

Bonded  Debt  ■ • 8,589,285.00                               8,589,285.00 

Reserve  for  Deferred  Accounts: 

Reserve  for  Stores    35,149-65           35,149-65 

Reserve  for  Work  in  Process    • 49,120.34           49,120.34 

Reserve  for  Prepaid  Expenses  and  Advances    12,265.51           12,265.51 

Reserve  for  Miscellaneous  Tax  Accounts    26,876.96           26,876.96 

Reserve  for  Lands  (Uncompleted  Purchases)    177,820.00         177,820.00 

Reserve  for  Buildings,  Structures  and  Improvements    22,680.73           22,680.73 

Reserve  for  Interdepartment  Service  Charges    105.20                105.20 

Reserve  for  Equipment    14,441.74           14,441.74 

Total  Liabilities  and  Reserves $9,423,113.83       $745,702.66      $8,610,141.33 

Surplus — Net  Investment  of  the  City: 

Cash  in  Excess  of  Immediate  Demands  for  Cash $    123,642.06        $98,094.60     $   221,736.66 

Accounts  Receivable  in  Excess  of  Other  Liabilities 96,593.13           96,593.13 

Permanent  Properties  and  Equipment  in  Excess  of  Bonded 

Debt   11,516,776.64                               11,516,776.64 

Total  Surplus  $11,737,011.83       $1,501.47      $ii,738,5i3-30 

Total   $21,160,125.66       $744,201.19    $20,348,654.63 

CONSOLIDATED  FUNDING  STATEMENT 
SEPTEMBER  30,  1915 
REQUIREMENTS  AND  SURPLUS 
Requirements : 

Estimated  Requirements  $2,707,801.12    $2,707,801.12 

Surplus: 

Available  Surplus— Other  than  Cash 96,593-13           96,S93-i3 

Unapplied  Surplus— Net  Cash   123,641.86       102,594^0         $226,236.46 

Total   $2,928,036.11     $2,701,799.65         $226,236.46 

Authorizations : 

Authorizations — Unencumbered  Balance   $2,295,514.92    $2,204,943.39         $90,571-53 

Reserve  for  Contracts — Unliquidated  Contracts 618,914.60         485,335-47           I33, 579-13 

Reserve  for  Open  Market  Orders — Unliquidated  Orders 7,674.1 1             5,558-31               2,085.80 

Reserve  for  Miscellaneous — Unliquidated  Claims   5,932.48             5,932.48 

Total $2,928,036.11    $2,701,799.65         $226,236.46 

14 


Special 

Deposit 

and  Trust 

Account 

$67,269.84 


$67,269.84 


$  3,094.26 
64,175-58 


$67,269.84 


$67,269.84 


TABLE  II. 
REVENUES   AND  EXPENSES   FOR  PERIOD   ENDED   SEPTEMBER   30,    1915. 


REVENUES 
General  Revenue  Accruals  from  Taxes. 

Departmental  Revenues  

Other  Revenues 


Total  Revenues   

EXPENSES 
General  Expenses: 

General  Government  

Protection  to  Person  and  Property 

Conservation  of  Health 

Sanitation  or  Promotion  of  Cleanliness. 

Highways   

Charities  and  Corrections  

Education   

Recreation 

Public  Works  

Miscellaneous  General   


Total  General  Expenses 

Other  Expenses: 

Municipal  Industries   

Interest  on  Bonded  Debt 

Bond  Redemption 

Miscellaneous  Other  Expenses 


Total  Other  Expenses 

Total  Expenses  

Excess  of  Expenses  Over  Revenues. 


GENERAL  SURPLUS 


1 Current 

Month \ 

/— 3   Months 

to  Date--. 

Detail 

Total 

Detail 

Total 

$17,326.12 

$120,152.77 

19.495.74 

50.984-35 

S.007.47 

$41,829.33 

IS.738.35 

$186,875-47 

$15,493-91 

$  47.363-60 

61,899.21 

187.245-69 

3.770.60 

10,862.85 

15,217.18 

45.367.57 

46,307.96 

112,837-18 

1,201.42 

2,584.29 

7,260.05 

23,084.77 

17,097.46 

57,993-20 

3.677.77 

11,364.08 

1.35973 

173.285.29 

639.92 

499,343-15 

$  5.763.58 

$  16,877-82 

5.990.75 

175,696.93 

4,500.00 

135,500.00 

4,638.10 

20,892.43 

5.925.10 

333,999-85 

$194,177-72 

$833,343-00 

$152,348-39 

$646,467.53 

Surplus— July  i,  1915 $759,439-77 

Excess  of  Expenses  Over  Revenues — as  Above 646,467.53 


$112,972.24 
Less  Net  Increase  in  Deferred  Accounts  and  Surplus  Adjustment 114,473.71 


General  Surplus — September  30,  1915 • $1,501.47 


«5 


ACCOUNTING    ORGANIZATION, 


CHART  I. 

SHOWING     COMPLETE    CO-ORDINATION. 


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17 


CHART  II. 
BUDGET   SCHEDULE,    AS    BASIS    OF   CITY'S  SPENDING   PLAN. 


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19 


CHART  III. 
CONSOLIDATED  BALANCE  SHEET  OF   ASSETS   AND   LIABILITIES. 


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21 


CHART  IV. 
MUNICIPAL   REVENUES,   SEGREGATED    AS    TO   SOURCES. 


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23 


CHART  V.  :  : ... 

SEGREGATION  OF  EXPENSES  OF  DEPARTMENT  OF  PUBLIC  •HEALTH  AND  SAFETY. 


C/T-V 


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^^■F        14  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 

LOAN  DEPT. 

This  book  is  due  on  the  last  date  stamped  below,  or 

on  the  date  to  which  renewed. 

Renewed  books  are  subject  to  immediate  recall. 

^i'Jun'fiii)^ 

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JlIN  2  7  IQfil 

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UNIVERSITY  OF  CALIFORNIA  LIBRARY 


